BNP Paribas aims for higher returns for its shareholders until 2025
By Mauro Orru
BNP Paribas SA plans to increase the proportion of profits it pays out to shareholders until 2025, joining a cohort of European lenders to boost shareholder returns after the European Central Bank lifted restrictions on the payouts it imposed at the start of the coronavirus pandemic.
The French bank said on Tuesday it was aiming for a 60% payout ratio under its new plan from 2022 to 2025, including a minimum cash payout of 50%.
For 2021, it proposes a dividend of 3.67 euros ($4.20) in cash, which represents a payout ratio of 50% which increases to 60% taking into account a share buyback program of 900 million euros that BNP Paribas completed in December. The bank will distribute 5.4 billion euros in total for 2021 if shareholders support its proposal at the annual general meeting on May 17.
Europe’s big banks are forecasting higher returns for shareholders after the ECB lifted restrictions that limited dividend payments and share buybacks by lenders. The central bank had imposed the restrictions in March 2020 when the pandemic hit the markets, in a bid to bolster banks’ ability to absorb losses.
The restrictions have been particularly controversial for lenders since dividend payments are among the most effective tools for attracting and retaining investors. Now, the continent’s banks are catching up.
UniCredit SpA said it would bring in at least €16 billion by 2024, Intesa Sanpaolo SpA forecast €22 billion by 2025 and UBS Group AG said it would buy up to $5 billion shares this year.
BNP Paribas’ plan to increase its payout ratio comes as the bank targets average annual growth in net profit of more than 7% over the period 2022 to 2025, with revenue growth of more than 3.5% per year.
It also expects a Common Equity Tier 1 ratio – a key measure of capital strength – of 12% in 2025. Return on tangible equity – a key measure of profitability – is expected to be above 11%. %, the bank said.
BNP Paribas ended 2021 with a net profit of 9.49 billion euros, up 34% compared to 2020 and 16% compared to 2019. In the fourth quarter, the lender posted a net profit of 2, 31 billion euros against 1.59 billion euros a year earlier. Turnover increased from 10.83 billion euros to 11.23 billion euros.
Analysts polled by FactSet had forecast net profit of 2.01 billion euros on revenue of 11.40 billion euros for the last three months of the year.
Provisions for loan losses fell to 510 million euros from 1.60 billion euros a year ago, when banks were still bracing for potentially large losses on retail and business loans due to the pandemic.
Write to Mauro Orru at [email protected]; @MauroOrru94
(END) Dow Jones Newswire